Software M&A Recap
How APIs are driving innovation and transformationSoftware M&ARecapSECOND QUARTER 2022While not a new trend, the use of application programming interfaces (APIs)has become an increasingly discussed topic with our clients and as part ofthe transactions we work on. As industries — especially those that have beenslower to adopt technology — undergo digital transformation, APIs provide animportant role in connectivity and innovation.APIs are essentially secure connection points between one application andother systems, applications, devices or services. A 2021 survey said over 40%of large organizations use over 250 APIs and 71% of developers plan to usemore in the coming year.1 These are some of the trends we see that are drivingtheir increased adoption.We believe the following trends will drive an increase in the future adoptionof APIs.Companies’ increased usage of business applicationsrequires connectivityEDITORSSid NairCanada Technology M&A LeaderSenior Vice President, Ernst & Young Orenda Corporate Finance Inc.sid.nair@ca.ey.com 1 416 943 3404The days of companies having one single ERP application are long gone. Infact, in 2021, companies used an average of 110 business applications, a 38%increase over the prior year.2 Companies have found using an assortment ofbest-in-class solutions can be a successful strategy, but in many cases theyrequire connectors to effectively communicate with each other. That’s whereAPIs come in.Devon MacMurrayVice President, Ernst & Young Orenda Corporate Finance Inc.devon.macmurray@ca.ey.com 1 416 932 6131Lian PetersAssociate, Ernst & Young Orenda Corporate Finance Inc.lian.peters@ca.ey.com 1 416 932 543812“ The API Stack: The Billion Dollar Opportunities Redefining Infrastructure, Services and Platforms,”Forbes, May 4, 2021. “SaaS Data Security Report 2021,” BetterCloud, 2021.Adoption of the Internet of Things (IoT) is creating a needfor connections between devices and applicationsThe rise of the IoT is creating more communication points between devicesand applications. This creates a need for secure APIs to be able to effectivelyreceive data from connected devices so they can be used for data analysis andto drive insights.As more industries digitally transform, APIs are needed todrive innovation and make connectionsThere are industries that are undergoing massive digital transformation.These include financial services, health care, construction and government.Depending on the application, there’s an increased need for connectivity andcommunication between industries. For example, government applicationsmay need to receive legal, financial and health care information to betterserve their customers, and APIs can provide the bridge to securely andeffectively do this.That all said, this ability to innovate through connectivity is not without itschallenges. For some uses, larger applications may not have data that iswell configured to share through API. Earlier-stage industries like ESG arelooking to other business applications to allow customers to access the datathey need from the systems. Systems are continually changing to betterprovide connectivity with other systems, and new companies are beingfounded to deliver services through APIs to help fill the gaps in connectivitythat currently exist.
Software M&A RecapSECOND QUARTER 20222EY transactionsnapshotM&A TombstoneEY acted as the exclusivefinancial advisor to Metrioand led all portions of theprocess – leveraging our strongindustry sector expertise andtransaction experience to helpachieve an optimal outcomefor the Acquirer.About Metriohas been acquired byA technology company that operatesleading stock exchanges and servescapital markets globallyEY* acted as the exclusive financial advisor to MetrioSoftware Inc.*Ernst and Young Orenda Corporate Finance Inc.Metrio is a leader in sustainable development solutions.Since 2009, its CSR reporting software has helpedmore than 5,000 users at over 100 global companiessimplify the way they collect, analyze and share theirESG datato become more sustainable, transparent anda été acquise parprofitable. Metrio is a certified B Corp, a member ofthe SASB Alliance, a signatory to the United Nationsentreprisede atechnologiequi mène supplier.Global UneCompactandCDP accreditedses activités auprès de grandes Bourseset dessert des marchés financiers àl’échelle mondialeThe dealEY advisedInc. (Metrio)onde itssale to aEY* a agiMetrioà titre de conseillerfinancier exclusifMetrioSoftware Inc.technologycompany that operates leading stockexchanges and serves capital markets globally(the Acquirer).The Win-Win*Conseil en financement Ernst & Young Orenda Inc.The acquisition will allow the Acquirer to integrate theMetrio solution with other complementary businessesto provide an end-to-end suite of sustainabilityreporting solutions. This will help accelerate theAcquirer’s ability to support corporate clients who arelooking for improved reporting technology across allthree pillars of ESG.Working with the EY’s M&A teamwas certainly one of the bestdecisions in Metrio’s recenthistory! They helped us navigatethrough a very active industryconsolidation while adapting thego-to-market strategy as contextconstantly evolved. The EY teamdid impressive work to applytheir knowledge of the softwareand ESG industry to best positionus for a successful result. Theirexperience was instrumental notonly in finding the right strategicpartner for Metrio’s next phase, butalso in building the best transactionagreement for shareholdersand employees!– Patrick Elie, CEO and Co-Founder
Software M&A RecapSECOND QUARTER 2022Selecttransactions in Q2 2022*Jun 29, 2022: SMART Global Holdings (Nasdaq: SGH)announced the acquisition of Stratus Technologies, Inc.,a leading player in providing simplified, protected andautonomous Edge computing platforms, for a transactionvalue of approximately 275 million*.*Includes earnouts of 50 millionJun 27, 2022: Siemens Smart Infrastructure announcedthe acquisition of Brightly Software, Inc., a leadingprovider of cloud-based enterprise asset managementsoftware-as-a-service (SaaS), for a transaction value ofapproximately 1.9 billion*.*Includes earnouts of 300 millionJun 24, 2022: Hellman & Friedman LLC and Permiraannounced the acquisition of Zendesk, Inc., a leadingservice-first CRM company that builds software toimprove customer relationships, for a transaction value ofapproximately 10.9 billion. The transaction representsan enterprise value of 6.9x revenue.Jun 14, 2022: Future Health ESG Corp. (Nasdaq: FHLT)announced a merger with Excelera DCE, a provider ofan AI technology platform that provides physicians withprecision medicine insights technology, in a SPAC dealat an enterprise value of 459 million. The transactionrepresents an enterprise value of 1.3x revenue.*Deals indicated are Canadian deals.Data sources: S&P Capital IQ, Mergermarket, Press ReleasesJun 13, 2022: Cornerstone OnDemand, Inc. announcedthe acquisition of SumTotal Systems, LLC, a providerof learning and human capital management SaaS, fora transaction value of approximately 200 million.The acquisition represents an enterprise value of1.7x revenue and 8.0x EBITDA.*Jun 06, 2022: Descartes Systems Group (TSX: DSG)(Nasdaq: DSGX) acquired XPS Ship, LLC, a provider ofcloud-based multi-carrier parcel shipping solutions, fora transaction value of approximately 140 million*.*Includes earnouts of 75 million*Jun 07, 2022: Nasdaq, Inc. (Nasdaq: NDAQ) acquiredMetrio Inc., a privately held provider of ESG datacollection, analytics and reporting services based inMontreal. Nasdaq plans to integrate Metrio’s SaaSplatform into its suite of ESG solutions.*Jun 01, 2022: Information Services Corporation(TSX: ISV) acquired Reamined Systems Inc., a developerand operator of an online property tax analysis platformin the province of Ontario, for a transaction value of 36.3 million.May 26, 2022: The Glimpse Group, Inc.(NasdaqCM: VRAR) announced the acquisition ofBrightline Interactive LLC, a provider of virtual reality,augmented reality, 5G integration, spatial computing anddeep tech software and service solutions, for a transactionvalue of approximately 32.5 million. The acquisitionrepresents an enterprise value of 6.5x revenue.May 26, 2022: Broadcom Inc. (NasdaqGS: AVGO)announced the acquisition of VMware, Inc., a providerof multi-cloud services for all apps, enabling digitalinnovation with enterprise control, for a transaction valueof 72.8 billion. The acquisition represents an enterprisevalue of 5.3x revenue and 22.3x EBITDA.May 26, 2022: Advanced Micro Devices, Inc. (NasdaqGS:AMD) acquired Pensando Systems Inc., an operator ofa distributed services platform offering cloud computing,networking, storage and cloud security services, fora transaction value of 1.9 billion.May 09, 2022: Robert Glaser announced the acquisitionof RealNetworks, Inc., a provider of platforms such asSAFR, a computer vision platform for live video, andKONTXT, an NLP (Natural Language Processing) platformfor text and multi-media analysis, for a transaction valueof 24 million. The acquisition represents an enterprisevalue of 0.3x revenue.3
Software M&A RecapSECOND QUARTER 2022*May 05, 2022: Shopify Inc. (NYSE: SHOP) announcedthe acquisition of Deliverr, Inc., a provider oftech‑enabled e-commerce fulfilment services, fora transaction value of 2.1 billion.May 04, 2022: Intercontinental Exchange,Inc. (NYSE: ICE) announced the acquisition ofBlack Knight, Inc., a provider of software, data andanalytics services to the housing finance continuum,including real estate data, mortgage lending and others,for a transaction value of 16.4 billion. The acquisitionrepresents an enterprise value of 10.8x revenue and19.4x EBITDA.Apr 29, 2022: GI Manager L.P. announced the acquisitionof GTY Technology Holdings Inc., a provider of cloudsoftware solutions for the public sector, for a transactionvalue of approximately 428.5 million. The acquisitionrepresents an enterprise value of 6.6x revenue.Apr 27, 2022: Synopsys, Inc. (NasdaqGS: SNPS)announced the acquisition of WhiteHat Security,a leading provider of application security SaaS fromNTT Security Corporation, for a transaction value ofapproximately 330 million.Apr 26, 2022: TA Associates Management, LP andClearlake Capital Group, L.P. announced the acquisitionof Kofax Limited, a provider of intelligent automationsoftware to facilitate digital workflow transformations,for a transaction value of approximately 3.0 billion.*Deals indicated are Canadian deals.Data sources: S&P Capital IQ, Mergermarket, Press ReleasesApr 26, 2022: Arogo Capital Acquisition Corp.(NASDAQ: AOGOU, AOGO, AOGOW) announced amerger with EON Reality, Inc., a provider of virtual andaugmented reality (AR/VR) academic and industry trainingsolutions, in a SPAC deal at a pro-forma enterprise valueof 655 million.Apr 11, 2022: Kaseya Inc. announced the acquisitionof Datto Holding Corp., a provider of security andcloud‑based software solutions purpose-built for MSPs,for a transaction value of approximately 6.2 billion.The acquisition represents an enterprise value of9.4x revenue and 48.1x EBITDA.Apr 22, 2022: TPG Capital, L.P. announced theacquisition of ClaimsXten, the claims editing businessof Change Healthcare Inc., a technology provider forpayment services related to healthcare industry, fora transaction value of approximately 2.2 billion.Apr 07, 2022: Brookfield Business PartnersL.P. (NYSE: BBU) announced the acquisition ofCDK Global, Inc., a provider of retail technology andSaaS solutions, for a transaction value of approximately 8.3 billion. The acquisition represents an enterprisevalue of 4.7x revenue and 14.2x EBITDA.Apr 12, 2022: KKR & Co. Inc. (NYSE: KKR) announcedthe acquisition of Barracuda Networks, Inc., a providerof cybersecurity solutions across email protection,application security, network security and data protection,for a transaction value of approximately 4 billion.Apr 11, 2022: Thoma Bravo, LLC announced theacquisition of SailPoint Technologies Holdings, Inc.,a provider of enterprise identity governance solutions thatoffers on-premises software and cloud-based solutions,for a transaction value of approximately 6.9 billion.The acquisition represents an enterprise value of15.6x revenue.Apr 07, 2022: Bolt Financial Inc. announced theacquisition of Wyre Payments Inc., a developer ofa blockchain-based payment tool, for a transaction valueof approximately 1.5 billion.4
10Historical M&AactivityDeal volumes continue to dip compared to 2021 highs, with deal values ticking up slightlycompared to Q1 2022 2020Q22020Q32020Q42020Total M&A deal volumeQ12120Q22120Q32120Q42120Q12220Q22220Software M&A RecapSECOND QUARTER 2022Total M&A deal value ( b)Deal value by type of acquirer (%)Deal volume by type of acquirer (%)10070080500706040050300402003020100Deal value ( billions)90600Deal volume0088.148.8 Q21920Q31920Q41920Q12020Q22020Q32020Q4Total M&A deal 93.291.013.511.59.36.89.911.90086.52220Q2 2021Q3 2021FinancialQ4 2021Q1 2022Q2 2022Q2 2021 Q3 2021StrategicQ4 2021FinancialQ1 2022Q2 2022StrategicTotal M&A deal value ( b)Public company multiples continue to dip, subsequent to the highs observed in Q4 2021Revenue and EBITDA transaction multiples in Q2 2022 have continued to outpace those in Q2 2021 andare slightly down compared to Q1 202222.5xEnterprise Value/ Revenue20.0xTransaction Multiples Over TimeCRMHCMISISSPYMT36.7x36.7xSECCRM - customer relationship management - ERP - Enterprise Risk Platform - HCM - Human capital management - IS - Internet Software ISS - Industry Specific Software - PYMT - Financial payments - SCM - Supply chain management - SEC - Security4.0x4.0x6.0x6.0x*Yellow line indicates Q2 2021 comparison28.2x28.2x*Grey line indicates Q2 2021 comparisonEV/Rev (x)22EV/EBITDA (x)*Q2 2022 is based on a smaller sample of publiclyreported deal values than previous quarters* Sample size for M&A deal multiples has been sourced from S&P Capital IQ and comprises transactions completed between Apr 1, 2022 and June 30, 2022 in Canada and the US.* Sample size for M&A deal multiples has been sourced from S&P Capital IQ and comprises transactions completed between Jul 1, 2018 and Jun 30, 2022 in Canada and the US. The samplehas been compiled by EY Orenda Corporate Finance Inc. based on a subjective assessment of transactions in the Software sector. Furthermore, the categorization of the sample across varioussub-sectors and any analysis thereof, by EY Orenda Corporate Finance Inc. is solely for illustrative purposes and were not created to serve as benchmarks. Every transaction has specificcharacteristics that impact value and corresponding multiples. It is necessary to understand the background and circumstances surrounding each transaction to extract meaningful HCM17.9x17.9x RMCRMJun-22ERPERPMay-22-22Mar-22StrategicQ2 2022Apr-22Q1 2022Feb-21Jan-22SCMHCMHCM9.96.8Q4 2021FinancialDec-21NovOct21Sep-21-21Aug1Jul21Q2 2021 Q3 2021Jun-21May-21Q2 2022Apr-2Mar-21FebJan-21ERP-21Q1 2022Strategic-20-20FinancialNov-20SepAug-202.5xQ4 2021DecQ3 2021Oct20Q2 20.4x20.4x2054.1ISSISS61SCMSCM2010.0x48.8 51.261.62.9x2.9x9.6x9.6x18.9x18.9x Enterprise Value /EBITDA5
Ournational deal teamEY Building a better working worldEY exists to build a better working world, helping to createlong-term value for clients, people and society and build trustin the capital markets.OntarioSid NairCanada Technology M&A LeaderSenior Vice PresidentDevon MacMurray*Vice PresidentToronto 1 416 932 6131devon.macmurray@ca.ey.comToronto 1 416 943 3404sid.nair@ca.ey.comQuébecAtlanticFrançois Tellier*Senior Vice PresidentXavier CoutureVice PresidentMontréal 1 514 874 4351francois.tellier@ca.ey.comDieppe 1 902 421 6288xavier.couture@ca.ey.comPrairiesBarry Munro*President, Ernst & YoungCorporate Finance (Canada)Calgary 1 403 206 5017barry.g.munro@ca.ey.comMike CampbellSenior Vice PresidentSaskatoon 1 306 649 8305michael.campbell@ca.ey.comWorking across assurance, consulting, law, strategy, taxand transactions, EY teams ask better questions to findnew answers for the complex issues facing our world today.EY refers to the global organization, and may refer to one or more,of the member firms of Ernst & Young Global Limited, each of which isa separate legal entity. Ernst & Young Global Limited, a UK companylimited by guarantee, does not provide services to clients. Informationabout how EY collects and uses personal data and a description of therights individuals have under data protection legislation are available viaey.com/privacy. EY member firms do not practice law where prohibitedby local laws. For more information about our organization, pleasevisit ey.com.Ernst & Young Orenda Corporate Finance Inc. is registered as an exemptmarket dealer in Alberta, British Columbia, Manitoba, New Brunswick,Newfoundland and Labrador, Nova Scotia, Ontario, Quebecand Saskatchewan.Ernst & Young Corporate Finance (Canada) Inc., an affiliate ofErnst & Young Orenda Corporate Finance Inc., is an US registeredbroker‑dealer. Any inquiries regarding transactional services byUS persons should be directed to Ernst & Young Corporate Finance(Canada) Inc. through Devon MacMurray or Sid Nair. 2022 Ernst & Young LLP. All Rights Reserved.A member firm of Ernst & Young Global Limited.4069558ED NoneBritish ColumbiaRob WithersSenior Vice PresidentUjjwal BhatiAssociateVancouver 1 604 899 3550robert.withers@ca.ey.comVancouver 1 604 891 8325ujjwal.bhati@ca.ey.com* An Exempt Market Dealing RepresentativeEnabled by data and technology, diverse EY teams in over150 countries provide trust through assurance and helpclients grow, transform and operate.This publication contains information in summary form, current as of the date of publication,and is intended for general guidance only. It should not be regarded as comprehensive ora substitute for professional advice. Before taking any particular course of action, contactErnst & Young or another professional advisor to discuss these matters in the context of yourparticular circumstances. We accept no responsibility for any loss or damage occasioned byyour reliance on information contained in this publication.ey.com/en ca/strategy-transactions
CRM - customer relationship management - ERP - Enterprise Risk Platform - HCM - Human capital management - IS - Internet Software - ISS - Industry Specific Software - PYMT - Financial payments - SCM - Supply chain management - SEC - Security CRM ERP HCM IS ISS PYMT SCM SEC CRM ERP HCM IS SCM SEC 6.0x 7.1x 1.5x 5.9x 6.1x 3.0x 4.4x 6.5x 4.0x 3.7x .
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